* US, European stocks slide after dismal US jobs report
* Dollar falls to 7-week low vs yen, but rises vs euro
* US government debt falls in face of historic low yields
* Crude oil prices fall to lowest level in four years
(Adds close of European markets)
By Herbert Lash
NEW YORK, Dec 5 (Reuters) - U.S. and European stocks fell
on Friday after steep losses in the U.S. labor market sent bond
prices higher in Europe and pushed the price of crude below $41
a barrel as the outlook for the global economy darkened.
Investors in Europe dumped stocks and dove into less risky
fixed income securities, pushing a pan-European stock index
down 4 percent, as investors reeled from data showing 533,000
Americans lost jobs in November, the biggest drop in 34 years.
Oil prices slid more than 5 percent to a four-year low
while the dollar climbed against European currencies and the
yen rallied on another flight to quality in the face of a U.S.
recession that looms as the deepest since 1981.
"Just when you thought that the U.S. economic outlook
couldn't get any uglier, it goes ahead and does," said Meny
Grauman, an economist at CIBC World Markets in Toronto.
Stocks sold off broadly as investors feared the job losses
will cause consumers to cut back spending and sharply reduce
corporate earnings.
The energy sector was the biggest casualty on both sides of
the Atlantic. Exxon Mobil <XOM.N> fell 3.8 percent and Chevron
<CVX.N> dropped 2.4 percent, the Nos 1 and 3 drags on the Dow.
Total <TOTF.PA> slumped 8.9 percent and BP <BP.L> 6.6 percent,
the biggest drags on the pan-European FTSEurofirst 300 index.
Banks also were among the biggest drags in Europe, with BNP
Paribas <BNPP.PA> falling 7.5 percent and Credit Suisse
<CSGN.VX> dropping 5.5 percent.
"When you see such a shocking employment number, you
realize the devastating effect that can have on household
demand," said Henk Potts, equity strategist at Barclays
Stockbrokers in London.
In early afternoon New York trade, the Dow Jones industrial
average <> was down 88.01 points, or 1.05 percent, at
8,288.23. The Standard & Poor's 500 Index <.SPX> was down 7.67
points, or 0.91 percent, at 837.55. The Nasdaq Composite Index
<> was down 7.36 points, or 0.51 percent, at 1,438.20.
The pan-European FTSEurofirst 300 <> index closed
down 4 percent at 793.94 points, and has lost about half its
value so far this year.
Euro zone government bond futures rose, pushing the 10-year
<EU10YT=RR> cash yield below 3 percent and near Thursday's
trough of 2.939 percent, the lowest in over 30 years.
The U.S. unemployment rate rose to 6.7 percent in November
-- dramatic news that would normally touch off a flurry of
safe-haven buying of debt.
But with 10-year euro zone and U.S. yields -- which move in
the opposite direction to their prices -- near historic lows,
analysts said the near term risk was for market momentum to run
out of steam, as a fall in U.S. bonds would suggest.
Investors are reluctant to buy U.S. government debt with
yields hovering off their the lowest level in over 50 years.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
11/32 in price to yield 2.59 percent. The 2-year U.S. Treasury
note <US2YT=RR> was off 4/32 to yield 0.87 percent.
"We're already at (yield) levels we've never seen before.
It's just difficult to continue buying Treasuries at these
prices," said Kim Rupert, managing director of global fixed
income analysis at Action Economics in San Francisco.
November's job losses were the steepest since December
1974, when 602,000 jobs were shed, Labor Department data
showed, and were much worse than forecast by analysts polled by
Reuters who had predicted a reduction of 340,000 jobs.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.77 percent at 87.282. Against
the yen, the dollar <JPY=> fell 0.05 percent to 92.12.
The euro <EUR=> fell 0.80 percent at $1.2668.
U.S. light sweet crude oil <CLc1> fell $1.96 to $41.71 a
barrel.
Many dealers and analysts expect oil prices to soon test
the psychologically important $40 level as evidence mounts of a
significant decline in oil demand in developed economies.
Spot gold prices <XAU=> fell $15.15 to $750.50 an ounce.
Asian shares edged higher overnight, with the MSCI index of
Asian shares outside Japan <.MIAPJ0000PUS> rising 0.2 percent,
but trimmed gains to trade lower after the U.S. employment
report. The Nikkei average <> fell 0.1 percent.
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss and
Chris Reese in New York and Rebekah Curtis, Christopher Johnson
and Ian Chua in London; writing by Herbert Lash; Editing by
Chizu Nomiyama)
